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Stocks fall on Apple revenue warning; Dow drops 165

The Associated Press

U.S. stock indexes closed with mostly modest losses Tuesday as the market gave up some of its solid gains from the past two weeks.

Banks and technology stocks accounted for most of the decline. The Nasdaq eked out a tiny gain that was good enough to nudge it to another record high.

The selling, which lost some of its momentum in the final hour of trading, came as investors weighed the impact of the virus outbreak in China on Apple and other major companies.

The tech giant said revenue will fall short of previous forecasts in the fiscal second quarter because production has been curtailed and consumer demand for iPhones has slowed in China. Apple’s stores there are either closed or operating on reduced hours.

The iPhone maker is among the most notable companies to warn investors that the virus will hurt its financial performance. Medical device maker Medtronic also warned Tuesday that the virus outbreak will impact its quarterly results.

“The longer this goes on, the greater the focus is going to be on how much is this going to impact companies like Apple, which is considered not only a bellwether in tech, but a bellwether for the market overall,” said Randy Frederick, vice president of trading & derivatives at Charles Schwab.

The S&P 500 index fell 9.87 points, or 0.3%, to 3,370.29. The benchmark index remains just below its all-time high set on Friday.

The Dow Jones Industrial Average slid 165.89 points, or 0.6%, to 29,232.19. It had been down as many as 281 points. The Nasdaq recovered from an early slide, inching up 1.57 points, or less than 0.1%, to 9,732.74.

The Russell 2000 index of smaller company stocks fell 4.06 points, or 0.2%, to 1,683.52.

European and Asian markets declined. Bond prices rose. The yield on the 10-year Treasury fell to 1.56% from 1.58% late Friday.

Stocks opened lower Tuesday as U.S. markets reopened following the Monday’s President’s Day holiday.

As in recent weeks, traders reacted to the latest developments in the viral outbreak that began in China and has since infected more than 73,000 people. Most of the cases and deaths remain centered in China.

Businesses worldwide are increasingly caught in the economic fallout from the outbreak. The Beijing auto show, the industry’s biggest global event of the year, is being postponed indefinitely from its April date.

Apple and Medtronic are only the latest notable examples of companies that have warned investors about the economic impact of the outbreak on their financial performance.

Technology and health care companies have been the most vocal about mentioning the new coronavirus in their earnings conference calls, according to FactSet.

While Apple’s projected revenue miss took Wall Street by surprise, some analysts played down the long-term impact of the iPhone production delay on the company.

In a research note Tuesday, Canaccord Genuity analyst Michael Walkley said that Apple continues to perform strongly across all business lines, including iPhone 11 demand outside of China.

Apple shares fell 1.8%, while Medtronic slid 4%.

Despite the ongoing uncertainty over the viral outbreak investors have been willing to buy back into the market after a dip.

The S&P 500 has ended higher the past two weeks and is holding onto a 4.5% gain this month.

For the most part, investors are betting that the economic fallout from the outbreak will be limited to the first three months of this year, Frederick said. But if companies signal that they expect lingering effects on their business into the second quarter, investors could become less eager to jump back into the market.

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